I am sure most peeps will know this is my favourite airline - I fly them and I buy them.

Currently I hold a quarter unit as a longer term investment which is also useful for shareholder benefits.

I will be looking to substantially add at the right time and not afraid to trade them either intraday or more probably as a swing trade.


ains




Shadow of conflict looms large over British Airways as firm fights to recover

TRACEY BOLES - Scotland on Sunday

BRITISH Airways will warn that the prospect of war with Iraq casts a long shadow over its full-year this week when it posts third quarter figures in line with expectations.

Lord Marshall, the BA chairman, is expected to tell analysts that political uncertainty could push the airline, still struggling to recover from the effects of September 11, further into reverse.

"Iraq is a key driver for everything," said a source close to the airline.

BA has admitted privately to analysts that transatlantic bookings for this March are "appalling" as the uncertainty stirred up by the prospect of war exerts an influence. Earnings estimate downgrades are now highly likely.

However, analysts believe a loss for the full year is still not on the cards.

Pre-tax estimates for the full year currently stand at up to 140m. BAs performance, which represents a strong recovery from the 180m loss posted in the equivalent quarter after September 11, has been driven by a vigorous cost-cutting programme rather than by revenue, which is still flat.

It will announce tomorrow that it is on track to achieve cost savings of 450m by the end of March through a process of shedding jobs and loss-making routes under its future size and shape strategy.

By the end of next month 10,000 jobs will have gone under the programme. "BA has weathered the storm better than most by getting costs under control," said one analyst. "In Europe, only Iberia has done likewise."

Third quarter operating profits are expected to be around 30m to 40m, in line with analysts expectations, with pre-tax figures between a 10m loss and 5m profit. The consensus is break even.

The airline has impressed experts by taking the threat posed by low-cost carriers seriously.

Geopolitical and economic problems are affecting demand air travel, especially on long-haul routes. BAs premium services are still under pressure, recent traffic figures revealed.

A speedy Gulf war will lead to a relief rally for the airline sectors shares which are depressed at the moment. However, BA itself has warned that prolonged conflict could trigger a slump in aviation equivalent to that seen after September 11.

Chris Tarry, former aviation analyst at Commerzbank who now runs CTAIRA said: "I believe that the last quarter has been very tough on the revenue side and indeed they have indicated this themselves.

"Unfortunately the outlook is no better - even without a war. The reality of the economic situation in the UK was underlined with the rate cut.

"Add to that the structural downward shift in fare levels and then the uncertainty over war - it doesnt bode well.

"Furthermore, given the uncertainty caused by Iraq let alone an actual war, it is pretty clear that the transatlantic market will be dire in the summer."

BA has traditionally depended on transatlantic traffic for its revenue.

Shells chairman, Sir Philip Watts, also admitted last week that the oil giant was preparing for "uncertain times" ahead.

He said Shell had looked at the range of possibilities that could occur and had "a plan for every eventuality".

bloomberg

British Airways Plc (BAY LN) rose 6p, or 6.4 percent, to 99.25. Europe's biggest airline intends to reduce its supplier base as part of a plan to save 450 million pounds ($720 million) in the next two years, the Financial Times reported, citing Chief Financial Officer John Rishton.

BAY at the magick ..... need to fly through now



ains

I think this is too high and have shorted it today

Hmmmmmmmmm ....... Durlatcher says short into the rallies .... I am happy holding. Clearly the markets are thinking very very short war or none at all. Blair is said to be flying to Iraq summit over weekend .... hopefully not the same place as me



ains

sorry meant to add " a full unit" short

UBS Warburg retains its buy rating for British Airways in response to reports that the airline plans to cut a further 450 million in costs over the next two years.


According to the Financial Times BA aims to cut its UK suppliers to about 2,000 from 5,000. A year ago it had 14,000 suppliers/

However, UBS has cut the target price (BAY) to 150p from 200p. The shares have gained 6.25p to 99.5p.

The broker has a buy rating and 500p price target for Persimmon (PSN).

2003 Citywire

still ticking up and vieing for top position at plus 9.12% on the day with heavy volume ......

ains


BA to slash suppliers in bid to save 450m

BY JIM STANTON DEPUTY BUSINESS EDITOR Scotsman


BRITISH Airways, which earlier this week was demoted from the FTSE-100 index, is to cut its supplier base to save more money, it said today.

The company deals with about 5000 UK suppliers, but wants to reduce that number to about 2000 to help slash 450 million from costs over the next two years.

Last year the company had 14,000 UK suppliers. The firm is also understood to be looking to significantly cut the number of overseas suppliers.

BA is looking to cut external expenditure by ten per cent, or 300m, during the next two years, as well as 150m from internal resources. Excluding fuel, BAs external supplies spending runs to about 3 billion.

The company, along with the wider aviation industry, has been hammered by the downturn in tourism from the September 11 attacks on the US.

But BA has also suffered from a huge surge in competition from budget airlines, especially on its short-haul European routes.

John Rishton, BAs chief financial officer, said that the airline could only hit its target of ten per cent operating margins through a recovery in the market bringing higher revenues and also through a fall in fuel prices - despite all the actions to cut costs.

BA has forecast "flat" revenues for the coming financial year to the end of March 2004.

Mr Rishton said: "The market will come back but when and how much, I dont know." He added that costs were likely to escalate by around 400m over the next year, as higher fuel and landing charges and increases in pay, pensions and insurance dented the companys income.

About 11 per cent of BAs costs are tied to fuel. The price of jet fuel has risen by about 50 per cent from 155 a tonne to 234 in the past six months.

However, hedging fuel - buying in advance at the then market price - has helped BA save more than 60m.

Chairman Lord Marshall said that the "current situation is as bad as the aviation industry has ever experienced".

As well as the new drive to cut costs by 450m by March 2005, BA is also in the midst of a two-year programme which aims to take 650m out of its costs by March 2004.

Silla Maizey, BA procurement director, said that a "massive shift" was under way in BAs supply base, to stop duplication, reduce assets and inventory and slash prices.

She said BA wanted to concentrate on a long-term procurement strategy which she saw centring on about 100 core suppliers and close ties with about 500 more.

It would work with about another 1500 suppliers, but those would be on a more opportunistic basis. "We think we need 2000 suppliers," Ms Maizey said.

BA has already been involved in buying supplies at 16 e-Auctions, spending a total of 18m. The company said it saved 4.2m, or 23 per cent, for items ranging from courier services to stationery, headsets, blankets, seat leather and menus.

15 Mar 2003

BA boss warns of slump in traffic


LONDON (Reuters) - War in Iraq could shave 10 to 20 percent off British Airways' passenger traffic, the airline's chief executive Rod Eddington has said.
Eddington also warned that American Airlines, the world's biggest carrier and a partner with BA in its Oneworld alliance, was likely to be forced to seek Chapter 11 bankruptcy protection unless it negotiated "substantial" cuts in its employees' pay and conditions, the paper said.

British Airways has slashed 10,000 jobs since August 2001, cut capacity and reduced ticket prices to compete with no-frills carriers but the company said in February it would make a profit this year if there were no war in Iraq.

"It feels like there is a war on already. In a war bookings fall quickly, particularly in the premium cabins, people put off trips and fuel prices go up. We are seeing these things happening now," Eddington told the Financial Times in an interview published on Saturday.

BA is likely to deal with any sharp drop in traffic by grounding planes and accelerating an additional 3,000 job cuts the company has planned over the next 12 months, the paper said.

Last month, premium passenger traffic on BA flights fell by 14.3 percent year-on-year, while overall passenger traffic was down 5.6 percent.

Still, Eddington said the airline was much better prepared now to deal with a war in the Gulf than it was to deal with the aftershocks of the September 11 hijacked airliner attacks on the World Trade Centre and the Pentagon.

The company has built up available liquidity of 2.2 billion pounds -- 1.8 billion pounds in cash and 400 million pounds in committed facilities -- to help cushion a potential sudden sharp fall in revenues, the paper said.

The company will hold capital expenditures at 400 million pounds a year until March 2004 in an effort to save cash, chief financial officer John Rishton told the FT, adding that debt levels were "manageable."

BA cut its capital spending in the current fiscal year to March to 400 million pounds compared with 1.43 billion in the year to March 2001.

Eddington told the FT the "great unknown" in the airlines crisis is how much further the U.S. government will go in subsidising and bailing out U.S. carriers after it piled cash into airlines' coffers following September 11.

Two leading carriers, United Airlines and US Airways, are already in bankruptcy.

U.S. Treasury Secretary John Snow was more optimistic on Friday about the airline industry's ability to cope with an Iraq war, but said U.S. airlines must restructure their costs to deal with long-term stresses.

Eddington said any cost cutting at BA should be handled "sensibly" so as not to hurt its ability to capitalise on the summer season, often the strongest months for airlines.

If there is "a short, sharp war, we could still have a reasonable summer," Eddington told the FT.

Brillant stuff from Rod Eddington. War with Iraq would shave 10-20% of passenger numbers. Rod Eddington and Co must believe they have already been through World War III without the French!! Target price now around 43.5p

The reality is that passenger numbers in the industry whilst dented short term by a war, will continue to soar over the next 5 years and very few of them will be getting on a BA flight.

BA has no future within that timescale, the extinction of the dinosaur story will not arouse much interest second time around. Take a few paracetamol if the whines of management and shareholders get too much. Take comfort in the fact that by definition a terminal decline must have an ending.

Ainsoph, have you ever been on an aeroplane? What do you like most about BA? Why dont you post a photo of urself, we'd all love to put a face to the abuse!!

I`m short on this , and tomorrow will be the big- dipper I reckon

ps not a full unit short though,

Is ainsey still a quarter short of a full unit?

Possibly a unit short of a full quarter, but don`t quote me on that

The threat of war is making the outlook bleak for British Airways.After its investor briefing last week,many believe it will be lucky to break even in the coming financial year.

The struggling carrier is on track to report 130m pretax profits in the year ending this month,despite a 7pc decline in sales.That follows tough action from chief executive Rod Eddington,who has cut 1.1bn or 11pc off costs. But the fall in traffic is undoing his good work,and he is targeting another $450m savings in two years.

Citgroup analyst Andrew Light predicts just 22m net profits for the coming year.This assumes another 1pc fall in sales.
That leaves the airline,ejected from the FTSE 100 index again last week, vulnerable if sales fall further.

Every 1pc decline in revenue would take 50m off pretax profits.

Industry sales fell 5pc during the year of the last Gulf War.This time is worse. Sales of premium tickets are already 20pc below the peak two years ago.These provided nearly half BA`s revenues. September 11 left the industry in turmoil,while budget carriers are grabbing business.

BA has debt of 5.1 Billion and owes another 1.1 Billion in off-balance sheet leases,secured on planes.

Amazing its holding up so well considering, I thougt 80p would have been the level today, soon will be .

Ainsoph,

Hello me old mucker, I'm back and fighting.

Regards,

Wordy

I see a bit of profit taking dropping this 4/5 % pretty soon, as I am short that will be a blessing.

Hello Wordy ..... good to see you back .... and winning I hear :-))


Pleased I didn't listen to the short peeps and now well up on my recent trades (30% maybe) ..... lots of news and broker upgrades over the last few days. I have been sampling their European service over the last few days (spending some of the profits) and the service was excellant - everything running to time with good people looking after us .... and that's what counts.

Today's big news is the aftermath of the German let down and the need to start talking to other interested parties ... at least they made the 6 million.


ains



Merrill Lynch returned from the company's annual investor day and repeated its "buy" recommendation. "BA is totally realistic about the challenging trading outlook and management had a credible plan to address this. It has identified and quantified yet further cost reduction opportunities," Merrill analyst Anthony Bor said.

Schroder Salomon Smith Barney maintained its 'in-line' rating on the UK airline with a 'post-war/no war' target price of 200 pence. The US broker said BA's 'Investor Day' was as expected in terms of content and openness, with the airline's restructuring plan on target, and operating expenses already 1.1 bln stg lower in the current year than they were in the previous one. Schroder Salomon added that its earnings forecasts for BA, which it lowered earlier this week, remain intact. The broker concluded that BA remains its top pick for the next cycle on the basis of its strengthening balance sheet, vigorous restructuring efforts and high revenue exposure to the US and Middle East markets.

However, Schroder Salomon said BA's short term price movements are currently at the mercy of political developments. Elsewhere, UBS Warburg also reiterated its 'buy' rating on BA shares in comment this morning, although it said it has cut back its target price to 150 pence from 200.

By Jonathan Stempel
NEW YORK (Reuters) - Credit rating agency Standard & Poor's has said it may cut its ratings for 11 airlines and 14 aerospace companies because a U.S.-Iraq war looks "imminent".

Nine U.S. airlines, including three of the five largest -- Delta Air Lines Inc., Northwest Airlines Corp. and Continental Airlines Inc. -- as well as European carriers British Airways Plc and Deutsche Lufthansa AG are covered by the airline review. S&P said it may cut British Airways to "junk" status.

"Airlines, particularly large U.S. hub-and-spoke airlines, have already been hurt by high fuel prices, an accelerating erosion in bookings on international routes, and, indirectly, by the depressing effect of uncertainty on business activity," S&P analyst Philip Baggaley said in a statement. A war would cause "further financial damage," he said.

The credit rating agency's review of aerospace companies includes Boeing Co. BA.N , the world's largest commercial aircraft maker, and European Aeronautic Defence and Space Co. EAD.PA EAD.DE , which owns most of Airbus SAS, Boeing's largest rival.

United Airlines Inc., a unit of UAL Corp. UAL.N , warned for the first time on Tuesday that there is a "distinct possibility" that it may go out of business. Some analysts, meanwhile, have said AMR Corp. AMR.N unit America Airlines Inc., the world's largest airline, might soon follow United and US Airways Group Inc. UAWGQ.OB into bankruptcy court.

Transportation Secretary Norman Mineta on Tuesday acknowledged a war might hurt U.S. airlines, and said the government is ready to assist them if necessary.

S&P said it may downgrade AirTran Holdings Inc. AAI.N , Alaska Air Group Inc. ALK.N , America West Holdings Corp. AWA.N , ATA Holdings Corp. ATAH.O , Atlantic Coast Airlines Holdings Inc. ACAI.O , British Airways BAY.L , Continental CAL.N , Delta DAL.N , Deutsche Lufthansa LHAG.DE , Northwest NWAC.O and Southwest Airlines Co. LUV.N .

The aerospace review includes Argo-Tech Corp., Boeing and its Boeing Capital Corp. unit, Britax Group Plc, Dunlop Standard Aerospace Holdings Plc, EADS, Goodrich Corp. GR.N , Hexcel Corp. HXL.N , K&F Industries Inc., Sabreliner Corp., Sequa Corp. SQAa.N , Textron Inc. TXT.N and its Textron Financial Corp. unit, and TransDigm Inc.

S&P analyst Roman Szuper said the operating environment for airline equipment and aftermarket suppliers is "very challenging," especially in the United States, and will likely weaken in the near term if war breaks out.

HUB-AND-SPOKE OPERATORS UNDER PRESSURE

British Airways, Lufthansa and Southwest carry "investment-grade" ratings, while the other carriers are "junk" rated. S&P downgraded 11 U.S. airlines' aircraft-backed debt on Feb. 18 and has said it may downgrade other airlines, including aircraft-backed debt of American, United and U.S. Airways.

"Hub operators are under severe pressure, and their credit statistics and liquidity positions are getting weaker," said Brian Clapp, an analyst at Muzinich & Co. in New York, whose $3.5 billion of junk bonds include Continental, Delta and Northwest debt. "This has been the case pretty much since the summer of 2001, even before 9-11."

Downgrades often boost borrowing or refinancing costs.

S&P rival Moody's Investors Service on Monday said it may downgrade Delta, Northwest and Continental, which rank Nos. 3, 4 and 5 among U.S. carriers.

"Investors should stay away from unsecured airline debt until you see passengers start to come back, or if a UAL liquidation sends passengers elsewhere," said Clapp.

Baggaley said even if the United States and its allies enjoyed a quick victory against Iraq, and no significant terrorist attacks took place, airlines would likely still suffer substantial losses, and fuel prices would be likely to fall more slowly than they did after the 1991 Gulf conflict.

Regional carriers and low-cost carriers such as Southwest, which is profitable, are less likely to suffer from declining passenger traffic, S&P said. Major U.S. carriers lost more than $11 billion in 2002.

moving down nicely now, next stop 1 and then less, watch out for the announcement that the war is `go` if your short, all their `planes will be grounded, and 60p for a short time seems likely